Dynegy officials announced their decision shortly after two agencies downgraded Enron's credit rating to junk status  triggering an obligation to immediately repay billions of dollars in debt that the once-mighty energy trader probably doesn't have the money to cover.

The dire situation left Enron, the seventh largest U.S. company in terms of revenue, facing almost certain bankruptcy, analysts said.

"It's the end of Enron, no question about it," said Gordon Howald, an analyst at Credit Lyonnais Securities in New York. "I don't know who else could step in."

Enron shares plunged $3.33, or 81 percent to 78 cents in Wednesday on the New York Stock Exchange; less than a year ago, they were trading at $84.87. With nearly 200 million shares exchanging hands, Enron smashed the one-day trading record for a NYSE-listed stock even though trading was halted for part of the session.

Dynegy shares were off $4.09, or 10 percent, to $36.81, also on the NYSE.

Enron is the country's top buyer and seller of natural gas, and the No. 1 wholesale power marketer. The company operates a 25,000-mile gas pipeline system, and markets and trades metals, paper, coal, chemicals, and fiber-optic bandwidth.

In a series of explosive disclosures last month, Enron revealed that partnerships run by its executives had allowed the company to keep about half a billion in debt off its books and allowed the executives to profit from the arrangements. Enron's dealings with those partnerships are now the subject of a Securities and Exchange Commission investigation.

The company ousted its top financial officer, and several weeks ago restated its earnings back to 1997  eliminating more than $580 million in reported income.

In a statement, Dynegy said some aspects of the acquisition agreement had not been met, triggering its decision to end the deal.

"While it is regrettable to see a leading industry player in difficulties, this does not reflect a failure of the energy merchant business, said Dynegy chairman and chief executive Chuck Watson.

Enron suspended payment of some debt and its executives were "evaluating and exploring other options to protect our core energy businesses," said Kenneth L. Lay, the company's chairman and chief executive.

"To do this, we will work to retain the employees necessary to the continuing operations of our trading and other core energy businesses," he said in a statement.

Two major credit rating agencies downgraded the Enron to junk status earlier in the day.

In separate statements, Standard & Poor's and Moody's Investors Service both had cited a loss of confidence that the deal will be consummated. They said Dynegy's willingness to go through with the buyout had been compromised by continued erosion in investor confidence and Enron's core energy trading business.

The downgrades make $3.9 billion of Enron debt due immediately, and up to $16 billion in other debt originally due next year could come due earlier.

Energy giant Enron and Dynegy, both based in Houston, had spent the last several days trying to hammer out a revision to their Nov. 9 merger agreement, which valued Enron stock at more than $10 per share.

"They were working on getting more cash (from banks shepherding the merger) last night, but they didn't get it," said A.G. Edwards & Sons analyst Mike Heim said. "I think bankruptcy's not too far away."

Raymond James analyst Jon Kyle Cartwright predicted Dynegy will survive with a few battle scars.

"I believe we all misunderstood how dramatic a credibility crisis can be in a recession in a bear market," he said. "The speed at which Enron collapsed caught us all off guard."

Dynegy also said it would exercise its right to purchase Enron's Northern Natural Gas pipeline, an option it received after it and ChevronTexaco Inc.  which holds a 26 percent stake in Dynegy  pumped $1.5 billion into the ailing Enron.

Enron said in a statement that is reviewing Dynegy's decision to exercise the option. Despite Dynegy's claim to the pipeline, analysts are anticipating a battle over Enron's assets in bankruptcy court.

"It's going to be a fight" between Dynegy and Enron's creditors, Howald said.